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Senior Portfolio Manager Alexandre Marquis and Head of Quantitative Research Vladyslav Dubikovskyy, discuss progress made in leveraging AI to improve risk and alpha forecasts, and detailed how they have embedded these innovations into portfolio construction techniques.

Income investing has long been of interest to equity investors seeking capital growth and attractive yields. Ageing populations and historically low interest rates have increased demand for such investments further. But income investing is not without its complexities. How can artificial intelligence help asset managers overcome these potential pitfalls and deliver consistent outperformance for clients?

After a horrendous 2022, where equities and bonds were hammered and the only safe haven appeared to be oil producers and commodities, 2023 has seen a revival of optimism in developed equity markets, while emerging markets have continued to suffer from the sluggish environment in China.

With rates at their highest for the past two decades, and fixed income allocation at the lowest due to the bloodbath for duration in 2022, many pension plans intend to reduce their equity allocation to collect the highest coupons they’ve seen for a long time. In this paper, we argue that all equities should not be treated equally in that reallocation move – while rebuilding a material fixed income exposure makes sense, some equity strategies should not be used to fund this reallocation, namely low volatility equities.